Sandhu v. Kanzler

Background

Baljinder Sandhu and Shivcharan Singh discussed investing in a Holiday Inn Express hotel. Sandhu provided funds for the purchase and claimed that he was entitled to an ownership interest. Glow Hospitality, LLC was created to own and operate the hotel, but its corporate documents initially listed Harkrishan Khatkar and Devindar Khatkar as its members. Later documents assigned different ownership percentages to other people, including Singh.

Sandhu was not listed as an owner in the documents used to purchase the hotel. In December 2009, Sandhu, Singh, and Harkrishan Khatkar signed a document stating that Sandhu had contributed $298,000 and was entitled to a 40% interest. Glow’s 2009 tax filings also listed Sandhu as owning 40%. In later disputes over Glow’s bank accounts and ownership, Kanzler took the position that Sandhu had never owned Glow. A Minnesota state court later entered a default judgment awarding Sandhu a 70% interest in Glow and damages against other defendants.

Sandhu and Glow then sued Kanzler and Witzel, Kanzler & Dimmitt, LLC. The complaint asserted two breach-of-fiduciary-duty claims by Glow, fraud and related claims by Sandhu, and a vicarious-liability claim against the law firm. The defendants moved for summary judgment, arguing that the claims were untimely, required expert affidavits that the plaintiffs had not supplied, and lacked sufficient evidence.

Statute of Limitations

The parties agreed that a six-year limitations period applied. Because the lawsuit was filed on August 16, 2016, claims based only on events before August 16, 2010 would be untimely. The plaintiffs argued that later acts kept their claims timely. The court rejected applying a continuing-violation theory to these financial claims, but held that the limitations issue did not end the case because the plaintiffs identified alleged acts after August 16, 2010. The court considered earlier events as background but assessed liability based on timely alleged acts.

Expert-Affidavit Requirement

Minnesota law requires specified expert affidavits in professional-negligence or malpractice cases when expert testimony is needed to establish the claim. The court held that claims related to an attorney’s professional services may also be subject to this requirement even when they are labeled as breach of fiduciary duty, fraud, or another theory.

Counts I and II were Glow’s claims against Kanzler and the law firm based on Glow’s former attorney-client relationship with them. The court held that proving the alleged fiduciary-duty breaches would require expert testimony about the applicable standard of care and whether Kanzler departed from it. Because the plaintiffs provided no required expert affidavit, the court granted summary judgment on Counts I and II.

Count V was a vicarious-liability claim against the law firm. Sandhu had no attorney-client relationship with Kanzler or the law firm, so his claim was not derivative of legal malpractice. Glow’s portion of Count V, however, depended on Kanzler’s liability to Glow and was subject to the expert-affidavit requirement. The court dismissed any claim Glow might have against the law firm on that basis.

Fraud and Aiding-and-Abetting Claims

For Count III, Sandhu alleged that Kanzler knew about, directed, or oversaw Singh’s and Harkrishan Khatkar’s alleged misappropriation of Sandhu’s investment, and that Kanzler failed to act after learning of Sandhu’s concerns. The court found no evidence that Kanzler knew of, directed, or oversaw any misappropriation. It also found no evidence that Kanzler allowed Sandhu to continue believing that his investment had produced an ownership interest. The court held that Kanzler was not responsible for Sandhu’s failure to ensure that his claimed ownership was recorded in Glow’s corporate documents and granted summary judgment on the fraud claim.

For Count IV, Sandhu alleged that Kanzler aided and abetted Singh’s and Harkrishan Khatkar’s fraud by preparing corporate documents and submitting affidavits in the state-court litigation. The court held that there was no evidence Kanzler substantially assisted or encouraged a breach of duty. It also concluded that the corporate-document work and affidavits did not establish the required assistance, particularly because Sandhu was not a documented owner when the affidavits were submitted. The court therefore rejected this claim on the merits.

The court also held that because Sandhu’s claims against Kanzler failed on the merits, Witzel, Kanzler & Dimmitt, LLC could not be held vicariously liable under Count V for Kanzler’s conduct.

Ruling

Judge Ann D. Montgomery granted the defendants’ motion for summary judgment. The order granted summary judgment on Counts I and II, dismissed Glow’s vicarious-liability claim that depended on Kanzler’s liability to Glow, rejected Sandhu’s fraud and aiding-and-abetting claims on the merits, and directed that judgment be entered.